1. Field of the Invention
The present invention relates to a method and a system for electronic trading of various asset classes including futures contracts and options on futures contracts (collectively “futures contracts”) which is configured to be connected to one or more electronic exchanges and integrated into the existing front office software of a broker or dealer to enable both exchange trades and over the counter (OTC) trades while providing the best fill for traders. One embodiment of the invention includes a local order book for an independent pool of liquidity for the OTC products.
2. Description of the Prior Art
Electronic futures exchanges for trading futures contracts electronically are known in the art. Examples of such exchanges are disclosed in U.S. Pat. Nos. 4,903,201; and 4,980,826. Such futures exchanges are also disclosed in various international patent applications: WO 98/21667(PCT/US97/20287); WO 02/06921(PCT/US01/22534); WO 02/33627(PCT/US01/32275) and WO 03/012598(PCT/US02/24560); WO 02/47006 (PCT/US01/47464); and WO 02/07498 (PCT/KR00/0106). In general, these systems have been developed to supplement if not replace so called “open outcry” futures trading exchanges, such as the Chicago Board of Trade (CBOT), Chicago Mercantile Exchange (CME) and the New York Mercantile Exchange (NYMEX). In such open outcry exchanges, floor traders stand in a pit and execute trades verbally. While such open outcry futures trading exchanges are still in use, electronic futures trading exchanges allow traders to access the market electronically and greatly facilitate trading in futures contracts.
Both International Patent Application Publication Nos. WO 02/07498 and WO 02/47006 disclose electronic systems for processing bids and offers for futures trades. In particular, International Patent Publication No. WO 02/47006 discloses a system for linking bids and offers and presenting the linked bid and offer to an electronic futures exchange to minimize any adverse affects the linked bids and offers may have on each other if presented at different times. International Patent Publication No. WO 02/47006. International Patent Application Publication No. WO 02/07498 relates to an interface between broker/dealers and customers for responding to requests for quotations (RFQ) from customers in which a customer RFQ is sent out to multiple broker/dealers and the resulting quotes are returned to the customer. In these cases there exists a single liquidity pool for the futures contracts and all of the trading is done on the exchange and thus subject to the rules of the exchange. With the single liquidity pool established by the exchange, orders are not necessarily filled at the best possible price. In addition, with all trades going through the exchange, the traffic at the exchange in completing trades could slow down the response time of completing the trades and thus could impact the market price of the futures contracts. Thus there is a need for a system to fill orders for futures contracts at better pricing and which alleviates electronic traffic on the exchange.